Asian MNCs Leapfrog their Western Peers When Expanding Globally and Developing Internally

Today, Asia Pacific-headquartered companies account for 40% of the firms in the Fortune Global 500, outnumbering those headquartered either in Europe or North America. This represents a significant growth from 10 years ago, when they comprised only 24% of the ranking. This jump is the result of a surprisingly unconventional growth story, according to a new study by Willis Towers Watson.

Willis Towers Watson’s “2016 Asian Trailblazers Study: Masters of Multitasking and Transformation” found that Asian multinationals (MNCs) have had to overcome substantial odds, including significant barriers to time, lack of experience, and managing highly divergent cultures, to achieve success. 

“These multinationals have had amazing — and sometimes unconventional — growth stories,” said Scott Burnett, Head of Asia at Willis Towers Watson. “They have not had the luxury of time nor been able to grow in an orderly and linear fashion like many of their global counterparts. We call them “Asian Trailblazers” in recognition of their pioneering spirit. They’ve had to venture into the unknown, and have made up for lost time by being pragmatic and agile, prioritizing, selectively outsourcing, and learning quickly on the job.” 

The companies in the region face many barriers. For instance, Chinese multinationals deal with a range of basic issues and need to develop compatible internal structures both at home and overseas. In India, multinationals need to adapt strong family business legacy structures.

Younger generations of leaders are transforming inherited structures to ones that are scalable, work beyond Indian borders, and are globally competitive.

Japanese and South Korean multinationals are focused on increasing efficiency and sustainability, and fully realizing the potential from past acquisitions. Meanwhile, many Southeast Asian multinationals typically started as family-owned businesses, and are now dealing with second- and third-generation leaders that have different business training and ambitions from their predecessors.

“Asian multinationals face a multitude of HR-related challenges, ranging from the very basic, such as getting consistent compensation and benefits data, to the very sophisticated, such as leadership development, embracing diversity and inclusion, and enabling globalization through internal cultural change,” said Gavin Watkins, Director, Client Development Group at Willis Towers Watson. “These unique challenges are compelling these companies’ HR teams to develop unique solutions — ones that could provide valuable insights to all multinationals globally.”

Leapfrogging past incremental change 

The study found that one of the ways that Asian multinationals are handling this pace of change is by “leapfrogging” some of the basic changes undertaken by their more developed counterparts, and making radical moves early on. 

For instance, in terms of shared service models for support functions, many fast- growing Asian Trailblazers are not setting up traditional bricks-and-mortar call centers, instead choosing to bypass this earlier stage of HR development and avoid obsolete systems, switching directly to mobile-technology-enabled ones. 

Furthermore, many Asian Trailblazers have also skipped several traditional elements of certain HR roles and jumped directly to a more strategic role, such as using workforce analytics, focusing on employee engagement or developing holistic wellness programmes. 

“It’s quite remarkable that these firms have been able to sustain this pace of growth given that, for the most part, their HR teams are much smaller and more under- resourced than their developed-market counterparts,” said Magdalena Ramada, Senior Economist at Willis Towers Watson. “While in the West, most large firms have experts for specific areas, such as compensation and benefits, managing rewards or talent, and so on, at Asian multinationals there is often only one or two key people dealing with all HR aspects of the organisation at the same time.

“In this way, the HR managers themselves become masters of multitasking, and are comfortable with highly flexible job roles. This is a further advantage when dealing with unexpected challenges.” 

Six areas of focus 

The report identifies six areas of focus for Asian Trailblazers: 

Globalization strategy: Asking the right questions (Why? Where to? How?) helps provide a framework as these firms look to expand into developed and emerging markets simultaneously.

Global governance: Trailblazers typically must manage a spectrum of complex global matters, from ensuring global consistency to strategic global governance. Many Trailblazers still operate without a global governance framework, making this all the more challenging. Asian multinationals also tend to locally control more than those from other regions.

M&A: In terms of acquiring abroad, currently MNCs from all regions seem equally acquisitive and expect to see significant M&A activity in the next three years — senior executives explain this preference for growth through M&A by pointing to the speed in which scale and market entry can be achieved. Trailblazers are now focusing on changing the nature of acquisitions and the proficiency with which they’re executed; better managing post-merger integration to optimize leverage and scale.

Reprogramming cultural DNA: Key cultural barriers include language, leadership style, and different communication preferences. Sometimes these differences are so stark that the first danger of making an acquisition in a foreign country is that key talent in the acquired workforce will leave. Asian Trailblazers are getting more adept at managing these differences but the road ahead is still long.

Leadership development: Few Asian multinationals have formal leadership development programmes, unlike their counterparts in the West. This is also closely linked to a firm’s global mobility approach — leaders without significant international exposure will be less equipped to lead a global firm. Building diverse leadership teams and compelling career paths becomes even more complex in state-owned or family-owned enterprises where leadership roles can be politically determined.

Diversity and inclusion: While some progress has been made, glass ceilings still prevail for young employees, non-nationals and women. The research shows that half of Asian multinationals have a formal diversity and inclusion programme however the study also revealed that these programmes cover only the basics, and initiatives that recognize diversity beyond basic categories, such as gender and age, are still lacking. 

“We found that when Asian firms expand, they first focus on markets close to home in the region — a departure from the model they followed 10 years ago, when they first ventured farther afield, into the markets of North America and Europe first,” said Burnett. “This is likely due to the fact that nowadays, markets are more vibrant in Asia than in the sometimes financially- and demand-depressed markets of the West.” 

“However, because Asia is such a diverse region, whether these firms go near or far is largely immaterial in terms of the complexity of their expansion. In fact, they are sometimes more likely to run into greater challenges in markets where they must deal with vastly different languages, fragmented vendors, and underdeveloped infrastructure. Cracking these markets will make them formidable competition for their Western counterparts, which are often looking to enter them too. All in all, the lessons learned, and the trail that these multinationals are blazing, gives rise to a valuable growth story that all global companies can learn from.” 

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